Patterson, Patterson CA Distribution Center Tour DG Macpherson Senior Vice President & President Global Supply Chain &

Strategy President, Hector Vega Director, Director Distribution

DG Macpherson p
Senior Vice President and President, Global Supply Chain and Strategy

June 2012

Forward-Looking Statements
This presentation contains statements that are forwardlooking; i.e., not historical facts. The forward-looking g; , g statements are based on the companys current expectations, and some of them are subject to risks and uncertainties the outcome of which could result in actual future performance being materially different from the performance indicated. They should be considered in conjunction with the companys most recent annual report company s report, as well as the companys Form 10-K and other reports filed with the Securities and Exchange Commission containing a discussion of the companys business and of company s various factors that may affect it.

June 2012

Agenda
Grainger Overview Americas S A i Supply Ch i l Chain Leveraging Global Scale g g The California Market and Patterson DC Tour

June 2012

About Grainger
Founded in Chicago, 1927 2011 revenues of $8.1 billion Distributor of maintenance, repair and operations (MRO) products; industry leader Growing international presence ~ 25% in 2012E

June 2012

Global Market
Worldwide MRO Market est. ~$575 Billion USD

North America

Europe, Middle East & Africa

Asia Pacific

Latin America & Caribbean

International business estimated to be 25% of sales in 2012

June 2012

Key Customer Trends

Basic customer needs largely unchanged g product, right p , g place, right time, fair p , g , price - Right p - Help navigating from problem to a solution Areas of increased importance - Total cost and cash management - eCommerce - O it assistance On-site i t - Safety and sustainability - Cross-border service

June 2012

Multi-Channel Advantage
Multiple

Large 74%
Channels Medium 21%
*Based on 2011 U.S. segment sales g

Small 5%

Single <1%
June 2012

Share of Wallet

25%

Customer End Markets

2011 United States Canada Other Businesses Total ota

% sales 80% 12% 8% 100% 00%

June 2012

Corporate Priorities
Product Breadth and Availability Customer coverage Inventory management eCommerce Supply chain / IT scale

June 2012

Supply Chain Priorities

Product line expansion DC network optimization Continuous Improvement/operational excellence Purchasing scale Global sourcing Transportation, logistics optimization Best practice sharing

June 2012

Product Line Expansion

U.S. Catalog Product Offering
(in thousands)

2005

2011

2014 2016 E

Incremental sales of 200 300 bps per year

June 2012

North American DC Network

June 2012

Greenville DC Improvements

June 2012

Expanded West Coast Presence p

Grainger MSC Fastenal McMaster-Carr

June 2012

Improving Productivity in Midwest p g y

Janesville, Janesville WI 500K Niles, IL 650K DC + 200K offsite storage

Minooka, IL 1M DC relocation underway

June 2012

Canada

Saskatoon Grand Opening May 2012

June 2012 May 2012

Mexico

June 2012

Execution & Continuous Improvement

Order defects Outbound cycle time Packaging costs Productivity

2007

2011

2007

2011

2007

2011

2007

2011

defect rate

minutes i t

$ per li line

$ per team member

Expanding Gross Margins

50

40
Gross Profit % t

30

20

10

0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total Company
June 2012

Expanding Gross Margins

Purchasing Scale Activities
- Global Line Reviews - $112M in COGS (20+ lines) reviewed in 2011 ( ) - Global Supplier Cost Matching

Global Sourcing Expansion

- 300 suppliers from 24 countries - >50,000 SKUs - Carries GP margins around 60% - Increasing capabilities in China

June 2012

Increasing Global Sourcing Capabilities

Engineering and quality control resources closer to the source Project management resources Sourcing capabilities Logistics support

June 2012

Information Technology
Leveraging technology across borders - Inventory and product information systems - Migrating to common warehouse systems Americas SAP to drive leverage and scalability

June 2012

Global Best Practice Sharing

Product Management Inventory Management Transportation DC Operations Network Design

June 2012

Leveraging Scale
Total Company Operating Margin*
16.0%

Margin Drivers Purchasing leverage P h i l Private label North American supply chain Back office consolidation y Quality/LEAN Americas SAP
*Excluding unusual items

15%
13.3% 11.5%

10%

9.4%

5%

0% 2005 2010 2011 Future

Future shown as mid point of 15 17% range 15-17%

June 2012

Hector Vega g
Director, Distribution

June 2012

San Francisco DC (SFDC) Overview

Facility Mission: Restock branches and ship customer orders quickly Opened October 2011 200 team members Land and Footprint 46 acres 820,000 square feet LEED Gold certified for limited environmental impact Sales More than $800K+/day and growing Inventory ~162,000 SKUs with capacity for 350,000 , p y , More than $50 million

June 2012

SFDC Reach Branch Replenishment

Washington Montana Maine North Dakota Minnesota Vermont Oregon New Hampshire South Dakota Idaho Wyoming Michigan California Iowa Utah Nevada Colorado West Virginia Nebraska Indiana Illinois Ohio Pennsylvania New Jerse y Delaware Wisconsin Massachusetts Rhode Island Connecticut New York

New York

Maryland

SFDC
Kentucky

Virginia

North Carolina Arizona New Mexico Texas Oklahoma Arkansas South Carolina Tennessee

Mississippi Alabama Georgia

Alaska

Florida

June 2012

SFDC Reach Customer Shipping

June 2012

SFDC Objectives
Customer Service Enhancements
Puts more products closer to West Coast customers to improve availability a d tu a ou d times p o e a a ab ty and turnaround t es University of California Facebook Stanford

Cost Savings C tS i
Positions inventory closer to customers to lower transportation costs Enables SFDC to serve as Grainger Global Sourcing (GGS) import DC, reducing transportation and double-handling costs

June 2012

Productivity Improvements
Designed for optimal productivity Incorporates learnings from ongoing Continuous Improvement efforts across the network, as well as the best design and material handling systems Inbound Outbound

June 2012

FACILITY TOUR

June 2012

APPENDIX

June 2012

Sales Growth Estimate

Investments drive share gain over time
2011A Economy/Share Gain Price Organic Sales (daily) 7% 2% 9% 2012E 6% - 8% 3% 9% - 11% 2013E - 2017E 6% - 10% 2% 8% - 12%

F/X, Sales Days Acquisitions Company Sales Company w/o Acquisitions

1% 2% 12% 10%

0% 3% 12% - 14% 9% - 11%

0% 1% - 2% 9% - 14% 8% 12%

Total Shareholder Return (TSR) Estimate

5-year CAGR 2013E - 2017E Low L High Hi h

10-yr. CAGR 1997 - 2006

5-yr. CAGR 2007 - 11

2012E

Sales EPS TSR NWA OM expansion (bps)

5% 8% 9% 4% 3

6% 16% 18% 9% 69

13% 17% 19% 19% 50

9% 15% 17% 9% 30

14% 20% 22% 12% 60

TSR shown includes EPS growth and dividend yield; it does not include changes in P/E multiple. 2012 NWQ 11% without Fabory. 2012 guidance of 12 14% sales growth and EPS of $10.40 - $10.80 as of 4/17/12 is reflected as midpoint of range.

Capital Allocation
More cash to return to shareholders and invest in the business

$ BIllions B

Share Repurchases 66%

Share Repurchases Dividends Capital

Dividends 61% Acquisitions 34% 39% Capital

2002 - 2006

2007 - 2011

Shares Outstanding & Dividends

SHARES OUTSTANDING
(millions of shares)

DIVIDENDS PER SHARE

$3.00 $2.52 18% CAGR $2.00 $2 00 $1.50

100 84 80 70 60 40
17% reduction

$2.50

$1.11 $1.00

20 0

$0.50 $0.00

2006

2011

2006

2011

40% reduction in shares outstanding since 1984 41 consecutive years of increased dividends

Return on Invested Capital (ROIC)

ROIC expansion continues as growth investments generate positive return
50%
WITHOUT FABORY

40%

30%

20%

10%

0% 2007 2008 2009 2010 2011 High 2012E 2017E

w/o Fabory

Low

U.S. Customer End Markets

End Market Heavy Manufacturing Natural Resources Commercial Light Manufacturing Retail R t il Reseller Government Contractor YTD 2012 +14% +14% 14% +12% +11% +11% 11% +9% +6% +5%

U.S business ~ 80% of 2011 total company sales

June 2012

U.S. Government End Markets

June 2012

IR Contacts
Laura D. Brown Senior Vice President, Communications & Investor Relations Laura.Brown@grainger.com Laura Brown@grainger com 847.535.0409 William D. Chapman Senior Director, Investor Relations William.Chapman@grainger.com 847.535.0881

June 2012